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Banks Still Looking for Bottom

The
outlook was somber in Washington on Wednesday at the annual AICPA
National Conference on Banks & Savings Institutions, where more
than 1,000 CPAs gathered to discuss accounting issues in the ailing
banking industry.

“The
S&L crisis was a Sunday school picnic compared to what we’re
going through today,” said Bert Ely, a Washington, D.C.-based
banking consultant, at a packed opening session. The concern, said
Ely, is that this recession will be longer and deeper than any
recession since World War II.

Despite trouble
in the industry, evidenced by 19 bank failures so far this year,
fundamentals for the majority of the sector are strong, according to
Ely. The
19 failed banks shared key characteristics of weak deposits and
significant construction lending outside of their home markets, he said.

Although
many proposals are circulating on Capitol Hill that would
consolidate regulatory agencies in the sector, Ely downplayed the
possibility that there will be such broad restructuring under the
Obama administration. He did, however, predict that the new
president will likely push legislation to allow bankruptcy court
judges to modify mortgages and also to have a 90-day moratorium on foreclosures.

“Housing
prices have not yet bottomed,” said Ely. “This is not just an issue
for the U.S. financial system or for the U.S. economy but for the
global economy.”